The construction industry is facing its sharpest decline for nearly 30 years and with little or no prospect of any turnaround in the short term, employment levels across the industry are expected to fall sharply throughout 2009. This is the stark picture according to the latest Trade Survey published jointly by the Construction Products Association and the Construction Confederation.

The Survey, which covers the fourth quarter of 2008 provides no respite from the current recession, with contractors and product manufacturing predicting that the decline experienced in 2008 will continue during 2009 as shrinking output and over capacity of construction activity will fall further over the course of a very difficult 2009.

Speaking about the survey, Noble Francis, Economics Director at the Construction Products Association said: "The Association’s anticipates that the construction sector as a whole will fall 9% during 2009, the sharpest fall in almost 30 years, with the private sector enduring the worst falls. Although product manufacturers experienced a very difficult 2008, declining demand combined both with rising energy costs and materials prices will continue to present an enormous challenge to the industry. Our survey suggests that the environment for product manufacturers is continuing to deteriorate and this is being felt by both light side and heavy side manufacturers.

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"Product manufacturers have reported that employment fell in the past three months but expect a further fall in the year ahead. 86% of heavy side manufacturers are reporting that employment levels had fallen, the fifth consecutive quarter during which employment fell. For the year ahead, 73% of heavy side manufacturers, expect employment will fall further. "Just 18 months ago, the main concern was whether the industry would have the capacity to produce the anticipated projects. However, this has dissipated and the main concern now is under utilisation of capacity both for contractors and manufacturers. In the last three months, only 32% of contractors, reported that they were operating at 90% capacity or greater, 18 months ago, this figure was 80%."

The fall in demand across construction has led to falls in tender prices and with costs still increasing, profit margins have fallen further. The reduction in demand has also led to a fall in employment and capacity utilisation for both contractors and manufacturers. Contractors are now finding it relatively easy to attract trades to work on site, a sharp contrast from the picture just 18 months earlier, prior to the economic slowdown.

It is not only contractors suffering from under-utilisation. Product manufacturers also face similar concerns, with 50% of light side firms and 41% of heavy side firms, operating at below 60% capacity. This has risen over the course of the past 18 and contrasts sharply with the trade survey in the second quarter of 2007 when no light side or heavy side firms reported that they operated below 60% capacity.

With demand falling, over capacity within the industry increases the probability of further job losses. The more capacity that is removed in the short term, the more difficult it will be to recover in the longer term when the market recovers and the long term demands of housing, prisons, schools and hospitals must be met.

(CD/JM)